Let's say I am trading a long-dated S&P500 option. If the Fed increases interest rates, I get that from a theoretical perspective, the value of the option will go up as the forward prices go up. However, if the Fed raises rates, wouldn't bond yields go up, and thus prices down, causing the money to flow from equity markets to bond markets? What am I missing? That would cause a decline in equity markets, no?
Submitted August 04, 2017 at 08:05AM by wanf http://ift.tt/2vwwwBe
